Merely because it is not in running condition, the machinery cannot be treated as scrapp

The Supreme Court in its Judgment Dated: 12-08-2008 between Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Product(Gunjara) Ltd., & Others., held that, "The word `scrap' would ordinarily mean something which cannot be used for the same purpose for which it was being earlier used even after repairing or renovating the same". The SC also observed that, merely because the assets were not in a running condition it does notmean that they were scrap. For instance, if the engine of a motor car is not functioning due to some defect,that does not mean that the motor car has become scrap. The motor car can be towed to a garage where a motor mechanic can repair it and then it can again become in running condition. The motor car will become scrap only if it is in such a dilapidated condition that it can never be made in running condition again despite repairs and renovation, and hence it will have to be sold as a piece of metal.

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